ACOs still face barriers to achieving profitability, care goals

September 30, 2020

It’s been a decade since the launch of accountable care organizations and many still struggle to realize their original goal

It’s been a decade since the launch of accountable care organizations, but many are still struggling to realize their original goal: providing high-quality care while lowering, or at least slowing the rise of, the nation’s health care spending.

That was the message Michael Chernew, PhD, and Jay Crosson, MD, the current and immediate past presidents, respectively, of the Medicare Payment Advisory Commission (MedPAC) delivered during Tuesday’s session of the National Association of Accountable Care Organizations’ virtual Fall 2020 conference.

Crosson noted that the ACO concept, defined as a set of physicians and hospitals accepting joint responsibility for the quality and cost of care provided to the ACO’s panel of patients, was first proposed by MedPAC in 2009, and included in the Affordable Care Act the following year.

“Not only MedPAC, but many health policy experts, were convinced at the time that this was going to be the solution for the future,” Crosson said. “But 10 years later, I know many of you involved in the day-to-day work of creating or managing ACOs have the sense that it’s not as simple as it might have appeared when it was a policy idea being developed. This kind of change is very difficult to pull off.”

Crosson acknowledged that many ACO administrators are grappling with regulatory, payment, and other issues to make the organizations profitable and “to fulfill the dream that was set out in the ACA.”

MedPAC’s June 2020 report to Congress addresses four major barriers to ACOs’ long-term success, Crosson said. These include:

•Few Medicare beneficiaries understand what ACOs are nor do they see any reason to join or cooperate with them;

•ACOs lack incentives to manage Medicare Part D drug costs, at a time when these costs are increasing;

•Most hospitals have financial incentives that conflict with those of ACOs; and

•Most ACOs are still wedded to fee-for-service payments

While addressing all these barriers has been challenging for MedPAC, Crosson said, managing Medicare drug costs has proven especially thorny. That’s because of the sheer volume of Part D plans, and that they are separate entities with no commercial ties to ACOs. The commission wound up asking CMS to consider facilitating voluntary associations between ACOs and Part D plans, with doctors in the ACOs helping to develop formularies, and ACOs and the drug plans sharing in cost savings.

Chernew, MedPAC’s current chairman, said that much of the drive to transition health care from volume to value is the result of fiscal concerns. He cited the impending exhaustion of the Medicare Part A trust fund in 2024, and the rapid increases in the Federal debt and deficit.

In addition, Medicare is facing demographic pressures as more baby boomers enroll in the program while the number of younger workers declines. “It doesn’t take a genius to understand if there’s more beneficiaries per worker, the workers have to pay more to fund the care for the beneficiaries,” he said.

The solution, Chernew said, lies in becoming more efficient at delivering care. That, in turn, requires allowing doctors the flexibility to decide which services to provide without having to think about the impact on their revenues, which is the goal of alternative payment models.

“In the fee-for-service world flexibility is stymied by the fact that when you reduce inputs [services and procedures], you lose revenue,” he said. By contrast, alternative payment models reward doctors and practices for finding more efficient and less costly ways of delivering quality care. “These models allow doctors to reap the financial gains from the efficiencies they care, so they don’t have to worry if they don’t do an MRI will they lose money?”

In the future, Chernew said, the ACO program can be improved by reducing the number of models, tweaking risk adjustment formulas and avoiding what he termed the “ratchet,” whereby ACOs that save money have their benchmarks lowered, making them more difficult to meet in subsequent years.